The existing Medicaid entitlement program began in 1965 as a government safety net to help poor children and their families earning less than 133 percent of the federal poverty level (FPL). Congress has steadily expanded the program to include aid for disabled and long-term care patients. By 1975, 10 percent of Americans were enrolled in Medicaid. This number grew to 20 percent last year. Medicaid enrollment in Washington state has grown 50 percent faster than the overall population since 1993 and now totals 1.2 million people.
Costs are paid in a 50-50 match between state and federal taxpayers. States have dramatically expanded the existing Medicaid programs because of the substantial federal contribution. Of course, federal taxpayers are also state taxpayers, so nearly everyone pays for 100 percent of the program, even though to state politicians half of it feels like “free money.”
Medicaid is the second largest budget item in Washington state (behind education) and the entitlement has grown three times faster than the overall budget since 1993. The total cost of the program in our state is now $6.2 billion per year.
The Affordable Care Act, or Obamacare, greatly expands Medicaid by adding any adult earning less than 138 percent of the FPL. The U.S. Supreme Court ruled that the federal government cannot force states to expand their Medicaid programs and that each state must make its own decision on expansion. The federal enticement is that funding for the Obamacare expansion would come exclusively from federal taxpayers for three years and then gradually culminate in a 90-10 federal-to-state match.
For state officials, this appears to be “free money” and state Democrats and Republicans across the country are supporting the Medicaid expansion. Estimates predict 280,000 to 500,000 Washington residents will be eligible for the new Medicaid program.
So, if it’s such a great deal, why not support the new expansion?
First, Washington state taxpayers will be obligated for an additional tax burden. Even with the federal government paying 100 percent of the health care costs for three years, our state will still need to pay immediately for the administrative costs of the expansion. Then, when the 90-10 match occurs, state taxpayers have to pay $2.4 billion over the first 10 years.
Worse, the federal government has grossly underestimated the cost of Obamacare. If states are forced to pay a “blended” rate close to the existing 50-50 match, the cost to Washington state taxpayers would jump to at least $12 billion over the first 10 years. And this cost would be on top of what Washingtonians pay as federal taxpayers.
Second, the Medicaid expanded entitlement will crowd out low-wage workers from receiving private, employer-paid health insurance. Employers with fewer than 50 workers will make a logical financial decision and drop employee coverage. Under Obamacare’s individual mandate, these workers will then be forced into the expanded entitlement program against their will.
Third, virtually every policymaker predicts a “coming out of the woodwork” or “welcome mat” effect, by which people who qualify but haven’t enrolled in the existing Medicaid program will do so. The Urban Institute estimates 545,000 Washington residents fall into this group. These people would only be eligible for the existing Medicaid plan and would add $14 billion in state taxpayer costs for the first 10 years.
Last, and most unfortunate, is that the Medicaid program does not provide good health care for patients. Except for very specific populations such as HIV/AIDS patients, there is no solid scientific evidence that Medicaid provides better health outcomes for patients than having no insurance at all.
Also, Medicaid pays providers on average only 40 percent of what private insurance pays. This shifts the financial burden to private insurance companies and reduces the number of providers financially able to see Medicaid patients. Each year access to health care for our existing Medicaid patients gets worse.
We have had 47 years of experience with Medicaid. It is a costly, inefficient, centrally planned government health insurance program that needs meaningful reform. Simply adding hundreds of thousands more Washingtonians to Medicaid will not improve their health, but it will limit choices for those patients, and will be a huge burden on state taxpayers.